International disputes: UN Mission of Support
in East Timor (UNMISET) has maintained about a thousand peacekeepers
in East Timor since 2002; East Timor-Indonesia Boundary Committee
continues to meet, survey, and delimit the land boundary, but several
sections of the boundary especially around the Oekussi enclave remain
unresolved; Indonesia and East Timor contest the sovereignty of the
uninhabited coral island of Palau Batek/Fatu Sinai, which prevents
delimitation of the northern maritime boundaries; many of 28,000 East
Timorese refugees still residing in Indonesia in 2003 have returned,
but many continue to refuse repatriation; East Timor and Australia
continue to meet but disagree over how to delimit a permanent maritime
boundary and share unexploited potential petroleum resources that fall
outside the Joint Petroleum Development Area covered by the 2002 Timor
Sea Treaty; dispute with Australia also hampers creation of a southern
maritime boundary with Indonesia.

Geography

East Timor is located in the eastern part of
Timor, an island in the Indonesian archipelago that lies between the South
China Sea and the Indian Ocean. East Timor includes the enclave of
Oecussi, which is located within West Timor (Indonesia). After Indonesia,
East Timor's closest neighbor is Australia, 400 mi to the south. It is
semiarid and mountainous.

Government

Republic.

History

Timor was first colonized by the Portuguese in
1520. The Dutch, who claimed many of the surrounding islands, took control
of the western portion of the island in 1613. Portugal and the Netherlands
fought over the island until an 1860 treaty divided Timor, granting
Portugal the eastern half of the island as well as the western enclave of
Oecussi (the first Portuguese settlement on the island). Australia and
Japan fought each other on the island during World War II; nearly 50,000
East Timorese died during the subsequent Japanese occupation.

In 1949, the Netherlands gave up its colonies in
the Dutch East Indies, including West Timor, and the nation of Indonesia
was born. East Timor remained under Portuguese control until 1975, when
the Portuguese abruptly pulled out after 455 years of colonization. The
sudden Portuguese withdrawal left the island vulnerable. On July 16, 1976,
nine days after the Democratic Republic of East Timor was declared an
independent nation, Indonesia invaded and annexed it. Although no country
except Australia officially recognized the annexation, Indonesia's
invasion was sanctioned by the United States and other western countries,
who had cultivated Indonesia as a trading partner and cold-war ally
(Fretilin, the East Timorese political party spearheading independence,
was Marxist at the time).

Indonesia's Human Rights Abuses Focus International Attention on East
Timor's Bid for Independence

Indonesia's invasion and its brutal occupation
of East Timor—small, remote, and desperately poor—largely escaped
international attention. East Timor's resistance movement was violently
suppressed by Indonesian military forces, and more than 200,000 Timorese
were reported to have died from famine, disease, and fighting since the
annexation. Indonesia's human rights abuses finally began receiving
international notice in the 1990s, and in 1996 two East Timorese
activists, Bishop Carlos Filipe Ximenes Belo and José Ramos-Horta,
received the Nobel Peace Prize for their efforts to gain freedom
peacefully.

After Indonesia's hard-line president Suharto
left office in 1998, his successor, B. J. Habibie, unexpectedly announced
his willingness to hold a referendum on East Timorese independence,
reversing 25 years of Indonesian intransigence. As the referendum on
self-rule drew closer, fighting between separatist guerrillas and
pro-Indonesian paramilitary forces in East Timor intensified. The
UN-sponsored referendum had to be rescheduled twice because of violence.
On Aug. 30, 1999, 78.5% of the population voted to secede from Indonesia.
But in the days following the referendum, pro-Indonesian militias and
Indonesian soldiers retaliated by razing towns, slaughtering civilians,
and forcing a third of the population out of the province. After enormous
international pressure, Indonesia finally agreed to allow UN forces into
East Timor on Sept. 12. Led by Australia, an international peacekeeping
force began restoring order to the ravaged region.

East Timor Declares Independence

The UN Transitional Authority in East Timor
(UNTAET) then governed the territory for nearly three years. On May 20,
2002, nationhood was declared. Charismatic rebel leader José Alexandre
Gusmão, who was imprisoned in Indonesia from 1992 to 1999, was
overwhelmingly elected the nation's first president on April 14, 2002. The
president has a largely symbolic role; real power rests with Parliament
and Prime Minister Mari Alkatiri, also a former guerrilla leader.

The first new country of the millennium, East
Timor is also one of the world's poorest. Its meager infrastructure was
destroyed by the Indonesian militias in 1999, and the economy, primarily
made up of subsistence farming and fishing, is in shambles. East Timor's
offshore gas and oil reserves promised the only real hope for lifting the
country out of poverty, but a dispute with Australia over the rights to
the oil reserves in the East Timor Sea thwarted those efforts. The oil and
gas fields lie much closer to East Timor than to Australia, but a 1989
deal between Indonesia and Australia set the maritime boundary along
Australia's continental shelf, which gives it control of 85% of the sea
and most of the oil. Under these terms, Australia was to receive 82% of
the oil revenues and East Timor just 18%. Finally, after years of
wrangling, the two countries agreed in May 2005 to defer the redrawing of
the border for 50 years and to split the oil and gas revenues down the
middle.

East Timor Faces Economic and Political Woes

East Timor's capital, Dili, descended into chaos
in April and May 2006, when the prime minister, Mari Alkatiri, fired
almost half the country's soldiers for striking. The fired soldiers, who
had protested against low wages and alleged discrimination, then began
rioting, and soldiers loyal to the prime minister started battling them.
Soon the violence had spread to the police force and the civilian
population, causing about 130,000 to flee their homes to avoid the
bloodshed. Australian troops were called in to control the unrest. On June
26, Prime Minister Alkatiri resigned in an effort to stop the country's
disintegration. Alkatiri has been criticized for doing little to stem East
Timor's grinding poverty and social problems, but the former independence
fighter has remained immensely popular. In July, Alkatiri was replaced by
José Ramos-Horta, winner of the 1996 Nobel Peace Prize.

In April 2007 presidential elections—the first
since the country gained independence—none of the candidates won a
majority, necessitating a runoff election. Francisco Guterres took 28.8%
of the vote, Prime Minister Ramos-Horta garnered 22.6%, and Fernando de
Araujo won 19%. Ramos-Horta prevailed in the second round of voting,
taking 69% to Guterres's 31%. Estanislau da Silva took over as interim
prime minister, replacing Ramos-Horta, who held the post since 2006. In
August, President Ramos-Horta named independence activist Xanana Gusmão as
prime minister. The move sparked violent protests led by supporters of the
Fretilin party, the former governing party. Fretilin won the most seats in
elections, but Gusmão formed a majority coalition, called the Alliance of
the Parliamentary Majority (AMP).

President Ramos-Horta survived an assassination
attempt in February 2008. He was shot in the back and stomach in a gun
battle outside his home between his guards and supporters of renegade
general Alfredo Reinado, who was killed in the altercation. Reinado and
several other generals were fired in 2006 after lodging complaints of
discrimination. Their case became a rallying cry against the government
and sparked a wave of protests. Shortly after the shooting, Prime Minister
Gusmão's motorcade was attacked by the same rebel group, suggesting a coup
attempt. He was not injured in the ambush.

Independence hero and incumbent president Ramos-Horta was eliminated in the first round of March 2012 presidential elections, placing third behind opposition leader Francisco Guterres and former guerilla fighter and armed forces chief José Maria Vasconcelos (known by his nom de guerre Taur Matan Ruak). Ruak won April's runoff with Guterres, taking 61.2% of the vote.

Xanana Gusmao Resigns as Prime Minister

In February 2015, Xanana Gusmao, 68, announced his resignation. He stepped aside to allow a generation of younger leaders take the helm of the country, which is still struggling economically. About half of East Timor's 1.2 million people are living in poverty. Former health minister and opposition leader Rui Maria de Araújo succeeded Gusmao. As part of a restructuring of government, Araújo is expected to reduce the size of the cabinet and make it more representative.